Ad Exchanges and Real Time Bidding Update

So it’s been over four years since we first posted “Are Ad Exchanges and RTB the Next Big Thing?“. We are amazed that the article is still being referenced as a resource for this topic. Let’s take a look and see what’s developed since 2010.

Real Time Bidding (RTB), is now often associated with “long tail” remnant inventory and being risky in terms of transparency around placement of impressions. Buyers cannot always determine exactly what site their ads run on. Publishers have often referred to the technology as “Race to the Bottom” as automated auctions drive CPM’s lower.

Now for the good news. The technology developed for automated auctioning of inventory has been re-branded as “Programmatic”. Programmatic is as buzz worthy in 2014 as RTB was in 2010 and has the potential to be even more influential. Here’s why:

Data: The technology stack enables the ability to target audiences in real time based on first party (publisher or marketer proprietary), second party (syndicated) and third party (aggregated) data. This technology has not only driven digital marketing growth rates, it will likely revolutionize the linear broadcast, cable television and on demand ecosystems as well. Television advertising is shifting from targeting based on the demographics of the show to targeting specific audiences based on data. Sound familiar?

Workflow productivity: Traditional digital buying revolved around the same workflow as traditional media: humans negotiating the terms of an insertion order. That means phone calls, emails and lots of excel. Top talent coming out of college, often with student loans to pay off, are not flocking to media agencies to do low paid grunt work. Conversely, top engineering talent that once headed to the financial services industry to build trading desks are now building Demand Side Platforms (DSP), Supply Side Platforms (SSP) and Data Management Platforms (DSP).

These exchanges can be public like RTB, open to all marketers, or private, where publishers can control who has access to the inventory and at what price.

Note the reference to “marketers” vs. “advertisers”. The technology has evolved far beyond just buying and displaying ads. With rich data integration, marketers have converted the “Marketing Funnel” into the “Consumer Journey”. They can put the right message to each interested consumer at he right place at the right time. Awesome, right?

Not so fast kemosabe. Challenges remain:

The ecosystem is fragmented: Venture capital and the desire for profits has fueled literally hundreds of start ups and not all of them will survive. There are so many technology vendors and inventory sources in the space that marketing campaigns at scale are difficult to manage. There is a wave of consolidation happening and this will likely accelerate.

Lack of transparency around price and placement: Agencies and exchanges profit by being principals in transactions, often not revealing the prices paid for the inventory. Marketers are starting to push back, in some cases bringing the technology in house. Marketers are also concerned with brand safety issues. They often do not wish their messaging appearing alongside objectionable content.

Fraud: The technology that enables the ecosystem is vulnerable high tech criminals intent on manipulating it for financial gain. Fraud is the biggest threat to the growth of the programmatic ecosystem.

Cookies: The cookie, which is the linchpin of most targeting mechanisms, is long overdue for replacement. The technology was never meant for what it is being used for and is arguably the weak link in the system. Additionally, cookies are not pervasive in mobile and mobile is the fastest growing digital platform. Marketers want to be able to target audiences across all platforms.

So, is Programmatic the next big thing? No, It’s already a really, really big thing. Depending on who you ask anywhere from 23% to 85% of marketers have embraced programmatic buying. As is often the case, the real number is probably nearer the middle of that range, but it’s still a big number and growing.

What’s next? Marketing Automation. Plugging customer relationship management (CRM) and internet of things (IOT) data into the ecosystem. Yes, your refrigerator will send a push notification to your car to tell you that you are low on milk and present you a coupon for your favorite brand at the retailer you are about to drive by. And since you aren’t physically driving the car, you’ll just tell it to stop and park.